Siemens and Mitsubishi eye joint bid for Alstom assets

Jens Hack, Benjamin Mallet

5 Min Read

MUNICH/PARIS (Reuters) - Siemens (SIEGn.DE) is in talks with Mitsubishi Heavy Industries (7011.T) over a joint bid for the energy assets of France’s Alstom (ALSO.PA), a move which could help the German firm overcome antitrust hurdles.

The logo of French power and transport engineering company Alstom is pictured on the roof of the company's plant in Reichshoffen near Haguenau, North Eastern France, April 24, 2014. REUTERS/Vincent Kessler

With a deadline looming for Siemens to submit an offer for the Alstom assets, the Munich-based firm and its Japanese counterpart issued a joint statement saying they would decide on a possible bid by Monday.

Taking Mitsubishi on board could give Siemens more firepower and flexibility as it mulls how best to counter a rival $17 billion bid for Alstom’s power activities by U.S. conglomerate General Electric (GE.N).

Bloomberg reported earlier that one option being discussed was for Mitsubishi to bid for Alstom’s steam turbine and power grid businesses while Siemens would acquire its gas turbine operations. Steam turbines are used in coal and nuclear power plants while gas turbines go into gas powered plants.

The move could help assuage concerns in Brussels about the dominant position of a combined Siemens and Alstom energy business, particularly in power grids.

Siemens is already a close second to Switzerland’s ABB ABBn.VX in the global market for high voltage direct current (HVDC) transmission gear, used for long-distance power lines and all offshore wind parks.

“Collaborating with Mitsubishi would be a clever move in as much as it addresses some concerns in the market that Siemens could overburden itself with an Alstom takeover,” said Union Investment fund manager Christoph Niesel.

But Niesel said worries would persist that an Alstom deal could distract new Chief Executive Joe Kaeser from a major restructuring, announced only last month, which is designed to refocus Siemens on profitable businesses.

A person close to Alstom also cautioned that splitting up the French group between the German and Japanese firms could encounter opposition from the French government, which has vowed to defend its own interests in any deal.

Such a deal “would lead to a dismantling which would hardly be accepted by the French government”, the source said. Alstom Chief Executive Patrick Kron has made clear he favours a deal with GE over Siemens.

Alstom declined to comment on Wednesday.

A spokesman for French President Francois Hollande said that Hollande wanted an update on Alstom’s case but at this point did not have a preference for a possible bidder. Hollande will meet with his prime minister and economy minister to discuss Alstom on Thursday, the official said.

SIEMENS DOUBTS

In the joint statement, Mitsubishi Heavy Chief Executive Shunichi Miyanaga said his company had been invited by Siemens to join forces.

“We firmly believe that we can substantially contribute to a partnership solution for Alstom which will create value for all parties involved, including the country of France,” he said.

Kaeser said he looked forward to working with Mitsubishi to create “a long-term oriented solution for Alstom, MHI and Siemens.”

The Siemens chief, who took the helm of the company last summer, told investors in New York in May that the U.S. shale gas boom would bolster demand for gas turbines, and that profitable long-term maintenance contracts with gas power plant operators added to the business’s allure.

But doubts have persisted about whether he is serious about a deal with Alstom, or is just seeking to push the price up for U.S. rival GE.

The French government sought better offers than the one GE initially put forward to preserve jobs and the country’s energy independence, pressuring Alstom to also open its books to Siemens.

But GE last month strengthened its position with a pledge to create 1,000 new jobs in France, winning recognition from Paris that it had made a more acceptable offer.

“We continue to have constructive discussions about the details of our proposed alliance with Alstom and remain confident,” a GE spokeswoman said in an emailed statement on Wednesday.

Alstom is a supplier of turbines for nuclear plants worldwide, and Paris has said it is concerned that a straight sale of its power arm could hurt France’s position in the energy sector.

The government has also said it is worried that Alstom, which makes France’s iconic TGV high-speed trains and was bailed out a decade ago, could be too weak as a standalone rail group.

Mitsubishi has recently moved to widen its footprint in Europe. It took over a majority stake in an Austrian metals business from Siemens in May and last year teamed up with Denmark’s Vestas Wind Systems (VWS.CO) for an offshore wind turbine joint venture.